Fiscal Policy Year 10 Economics and Business PDF

Humanities and Social Sciences Year 10 Economics and Business https://forms.office.com/r/MPWE9MiuHS Fiscal policy - Government Intervention (L1 –L3) Note taking Title: Fiscal Policy Title EQ: Explain how fiscal...

Humanities and Social Sciences Year 10 Economics and Business https://forms.office.com/r/MPWE9MiuHS Fiscal policy - Government Intervention (L1 –L3) Note taking Title: Fiscal Policy Title EQ: Explain how fiscal policy can be used EQ to manipulate the stages of the economy. Keywords Key Word [headings on slides] Notes Notes Homework (Do not rule up this section until we are finished with notes): Homework Answer EQ in Summary section Learning Objective Students will be able to explain fiscal policy. Students will be able to describe how the government uses fiscal policy to manipulate the economy. Success Criteria Students can identify and the correct policy to implement in various economic conditions and explain why. Students will be able to describe how the government uses fiscal policy to manipulate the economy.  Concept Government intervention Development Governments around the world pay close attention to the economy. They do this to maximise societies wealth and prosperity. The government intervenes in the free market by collecting taxes (revenue) and spending these taxes on collective wants for society. The amounts being collected and redistributed into society is presented each year in the Federal budget in Australia. CHECK FOR UNDERSTANDING Changing taxes and spending is known as What are two ways in fiscal policy. Governments do this to which the government intervenes in the stabilise the economy and avoid peaks as market? well as troughs.  Concept VOCABULARY VOCABULARY Development revenue: the money generated from normal business operations, calculated as the expenditure: the action of spending Regulating Business activity average sales price times the number of units funds. sold. Every individual, household, business or firm or organisation has a budget in which it identifies its sources of income and the ways those funds will be spent over a period of time. In the same way, the Federal Budget, estimates government revenue (receipts – tax collected) and the cost of expenditure (Spending -payments) plans for the coming year.  Concept CHECK FOR Budget outcomes UNDERSTANDING Development The outcome of the budget refers to Using the graph below, explain the shift in the the relationship between government government spending revenue and government spending. between 2020 and 2022. There are three possible budget outcomes: 1. Balanced budget = Revenue (tax collected) is equal to expenditure (government spending) 2. Surplus Budget = Revenue is greater than expenditure. 3. Budget deficit = Revenue is less than government spending.  Skill Development In your book write down the answers For the following scenarios identify if the budget is balanced, in a surplus or in a deficit? HINT: Ask yourself, did the government make a profit (surplus) or a loss (deficit) or neither (balanced)? Scenario A B C D Tax revenue 400B 500B 600B 550B (receipts) Expenditure 500B 500B 500B 450B (spending /payments) Answers Deficit Balanced Surplus Surplus  Concept Budget revenue 2022-23 Development CHECK FOR UNDERSTANDING Where did the government gained their revenue between the financial year of 2022-2023?  Concept CHECK FOR Development UNDERSTANDING Budget expenses 2022-23 In 2022-23, is the government running a budget surplus, deficit or balanced budget? Total revenue was 561B CHECK FOR UNDERSTANDING How much was the budget for non-government schools?  Skill Development In which phase of the business cycle do you think the government will be operating in a: 1. Surplus? Why? 2. Deficit? Why? Write your answers in your book using FULL SENTENCES.  Concept Purpose of the Federal Budget Development The Budget has two purposes: 1. Redistribute income from the wealthy to the less wealthy. The wealthy pay higher rates of tax and people on lower incomes receive more government support. 2. Stabilise the business cycle by achieving sustainable economic growth. Governments want to keep the indicators (GDP, unemployment, inflation) within their target ranges.  Concept Redistributing income [Robin Hood] Development The government redistributes income from the wealthy to the less wealthy in the form of a progressive tax system. In a progressive tax system, the more money you earn the more tax you pay and ultimately contribute towards society. Example: If you earn $200,000 a year you will have to contribute $63,000 in tax towards collective wants. If you earn $50,000 a year you will contribute $7,800 in tax. Remember a large amount of money collected in tax, pays for welfare payments (least wealthiest in society).  Concept Sustainable economic growth Development The government also uses the Federal budget to maintain sustainable economic growth. Sustainable economic growth refers to maintaining the target rates of the three indicators: GDP growth: 3-4% Inflation: 2-3% Unemployment: 4.5% The Federal budget can be used to either stimulate (increase) economic growth or it can be used to slow down economic growth. The use of the Federal budget to manipulate the economy is called Fiscal policy.  Concept Fiscal policy Development Fiscal policy is the manipulation of the budget to stabilise the economy. There are three possible fiscal stances that can be implemented. 1. Expansionary policy (used to increase economic growth) 2. Contractionary policy (used to decrease economic growth) 3. Neutral stance(used to maintain current growth)  Concept Expansionary policy Development Expansionary policy is used in a period of low economic growth. This would be during the contraction and trough phase of the business cycle. This can be implemented in two ways or a combination of the two: CHECK FOR UNDERSTANDING Decrease taxes -> By having to pay less tax, consumers will have more money to spend. Would the government have use expansionary Increase government spending -> building infrastructure policy during COVID? and transport provides jobs which again puts money into the hands of consumers.  Concept Contractionary policy Development Contractionary policy is used in periods of strong economic growth. This would be during the expansion and boom/peak phase of the business cycle. This can be implemented in two ways or a combination of the two: 1. Increase taxes -> This would lead to consumers having less money and therefore will have to cut down on spending leading to lower economic growth. 2. Decrease government spending -> a reduction in government spending would mean less jobs are paid for by the government (less projects being funded).  Guided There are three stances Practice 1. Which stance would you take? are: 2. How would you implement this 1. Expansionary 2. Contractionary stance? 3. Neutral stance (Increases or decreases to taxes and government spending) Targets Economic indicators: Economic growth: 3- GDP growth = 10% 4% Unemployment: 4.5% Unemployment = 2% Inflation: 2-3% Inflation = 5%  Guided Practice There are three stances 1. Which stance would you take? are: 1. Expansionary 2. How would you implement this stance? 2. Contractionary (Increases or decreases to taxes and government spending) 3. Neutral stance Targets Economic indicators: Economic growth: 3- GDP growth = 2% 4% Unemployment = 7% Unemployment: 4.5% Inflation: 2-3% Inflation = 1%  Guided There are three stances Practice are: 1. Which stance would you take? 1. Expansionary 2. How would you implement this stance? 2. Contractionary (Increases or decreases to taxes and government 3. Neutral stance spending) Targets Economic growth: 3- Economic indicators: 4% Unemployment: 4.5% GDP growth = 8% Inflation: 2-3% Unemployment = 3% Inflation = 4%  Guided There are three 1. Practice Which stance would you take? stances are: 1. Expansionary 2. How would you implement this stance? (Increases or decreases to taxes and government spending) 2. Contractionary 3. Neutral stance Economic indicators: Targets GDP growth = 4% Economic growth: 3- 4% Unemployment = 5% Unemployment: 4.5% Inflation = 3% Inflation: 2-3%  Guided Fiscal policy and the business cycle Practice For each phase of the business cycle which policy (contraction, expansion or neutral) would you run if you were in charge of the budget? Boom? Trough? Expansion? Recession?  Independent Infographic Practice During COVID the Federal, State and Local governments have implemented expansionary policies to help stimulate economic growth. Your job is to create an A3 infographic that has the following information: 1. Heading – Expansionary policies - COVID-19 2. Explanation of: 1. COVID – 19 and the impact on the economy. 2. Expansionary fiscal policy and why we need it now. 3. The 3 economic indicators and their June 2020 % levels – GDP, Unemployment, Inflation. 4. A Business cycle with a note of where you think the economy was in June 2020 and June 2021. 5. Pictures / clippings from news articles showing the different policies implemented by Local, State and Federal governments to stimulate economic growth. The following slide will have some links to help you get started. Independent Practice Useful Watching https://www.youtube.com/watch?v=Fo9h0mZmQDU Australian Budget Blowout due to COVID-19/Deficit forecast) (3:56) https://www.youtube.com/watch?v=XgJlQ8JWvkM (PM Scott Morrison warning on effect of COVID-19) (2:12)  Lesson Closure Fiscal policy The Federal Budget is produced every year in May. It states the estimated amounts of tax revenue and government spending for the following financial year. There are three budget outcomes: Surplus budget (government makes more money through taxes than they are spending) Budget Deficit (government spends more money than they are earning) Balanced budget (when the governments revenue is equal to its spending) Fiscal policy is the manipulation of taxes and government spending. They can use expansionary policy, contractionary policy or have a neutral stance depending on the economic indicators. It is used for two reasons: Stabilise the business cycle and keep indicators within the target range. Redistribute the income from the wealthy to the less wealthy.